Diesel prices begin to ease, along with shortage fears

| Tuesday, September 06, 2005

Prices for diesel fuel dipped on Tuesday, Sept. 6, after reaching record highs above $3 per gallon the previous week in the wake of Hurricane Katrina.

ProMiles reported a national average of $2.926 per gallon, with prices in most states dropping a penny or two from the previous week. Some areas, such as Connecticut, California, Idaho and Massachusetts, were still well above the $3 per gallon mark.

Other areas, however, are still experiencing shortages. Flying J reported shortages at some of its stations in Alabama, Arkansas, Kentucky, Florida, Georgia and Tennessee on Tuesday. Petro reported one outage at its Shorter, AL, store, though officials said supplies were expected there by Tuesday afternoon.

Some stations were still rationing fuel. Travel Centers of America reported rationing anywhere from 10 gallons to 50 gallons per truck at stations in Alabama, Florida, Georgia, Louisiana, Mississippi and Tennessee.

Crude oil dropped back close to pre-Katrina levels on Sept. 6, hitting a low of $65.65 in midday trading on the New York Mercantile Exchange.

Meanwhile, oil refineries in the Gulf Coast region continued with their comeback. Though about 70 percent of normal oil production in the area was still shut down on Tuesday, officials said at least four of the eight refineries shut down as a result of Katrina would be back up and running by the end of the week.

The Associated Press reported that two of the remaining four - one owned by Chevron Corp. and another owned by ConocoPhillips - suffered severe damage and are not expected to be operational anytime soon.

The U.S. Department of Energy reported that the pipelines that move refined fuel from the Gulf Coast to other parts of the country are recovering. The Colonial pipeline is now at 100 percent power. The Capline - which moves crude oil to refineries in the Midwest - is at 80 percent capacity.

However, the DOE said it would still take some time for things to get back to normal. As many as 137 oil rigs have been evacuated and crude oil production is down by more than 1 million barrels per day.

In Washington, a reconvened Congress is looking at ways to deal with the fuel situation. The U.S. Senate Energy and Natural Resources Committee was scheduled to meet Tuesday afternoon to examine fuel prices and the factors contributing to current high oil prices.

The DOE has already released a total of 8.5 million barrels of oil from the U.S. Strategic Petroleum Reserve and is also planning to make an additional 30 million barrels available for sale.

In addition, Secretary of Energy Samuel Bodman announced Friday, Sept. 2, the U.S. would also receive both oil and refined fuel products from international petroleum reserves.

Bodman said the International Energy Agency, a Paris-based group that advises 26 governments from the European Union and elsewhere, would release 60 million barrels of oil and refined fuel to the U.S. Those barrels will be released at a rate of 2 million barrels per day over the next month.